Open source software powers much of today’s tech - offering speed, flexibility, and huge cost savings. But for startups, using open source without understanding the licenses behind it can lead to real legal risk.
Here’s what founders need to know about using open source safely and smartly.
What Is Open Source, Really?
Open source software is code made available for anyone to use, modify, and distribute. But it’s not the Wild West - each piece comes with a license that governs how you can use it.
Some are permissive. Others are restrictive. And violating the license terms can jeopardize your entire product.
Why It Matters to Startups
Many founders assume open source means “free to use however we want.” Not true.
If you embed open source code into your product, certain licenses may:
- Require you to open source your own code
- Restrict how you sell or license your software
- Create IP risks that scare off investors or acquirers
Translation: bad licensing choices can hurt funding, M&A, or product strategy.
Types of Open Source Licenses
There are two main categories:
1. Permissive Licenses (e.g., MIT, Apache 2.0, BSD)
- Few restrictions
- You can use, modify, and include in proprietary software
- Great for startups
2. Copyleft Licenses (e.g., GPL, AGPL)
- Stricter rules
- May require you to disclose your own source code if you distribute software that includes it
- Risky if you plan to keep code proprietary or sell SaaS
Bottom line: Know the license before using open source in your product.
Using Open Source the Right Way
Best practices for startups:
✅ Track what you use
Use software composition tools or maintain an inventory of open source components.
✅ Review the license
Always check license terms before integrating third-party code. If in doubt, ask legal.
✅ Avoid copyleft in core products
Use permissive-licensed libraries for commercial offerings. Be extra cautious with anything GPL.
✅ Create an open source policy
Even a one-pager outlining acceptable licenses and review procedures can go a long way.
✅ Train your dev team
Make sure engineers understand license differences and know what to look for.
What About SaaS Companies?
SaaS businesses may think copyleft doesn’t apply because they don’t “distribute” software. But some licenses like AGPL extend to software accessed over a network.
If you’re using AGPL code in your backend, you may need to open source your entire SaaS platform. Know before you build.
Final Thoughts
Open source is a powerful tool - but it’s not a license-free zone. The good news: with a little foresight and the right legal support, your startup can safely benefit from open source without tripping into license traps.
Need help reviewing open source licenses or building a safe policy? We’ve got you covered.
Frequently Asked Questions
FAQs on Open Source Licensing for Startups
Can my startup use open source code in a commercial product?
Yes, but it depends on the license. Permissive licenses (like MIT or Apache 2.0) allow it, while copyleft licenses (like GPL) may require you to open source your own code.
What happens if we violate an open source license?
You could face legal action, be forced to release your proprietary code, or lose investor confidence. Compliance is critical.
Is open source safe for SaaS companies?
It depends. Copyleft licenses like AGPL may apply even if you don’t distribute your code. Always check terms before using them in your backend.
Do we need a formal open source policy?
Yes. Even a short policy clarifying what licenses are acceptable and requiring license checks before use can protect your company from major risks.
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